THIS IS not an endorsement of Germany’s government’s policy regarding the Cyprus bailout or the Euro-Crisis at large. While I do indeed support the case for intelligent austerity and deep structural reforms throughout the Western world, I admit, like many other informed people that the course advocated by Berlin has not been successful and that a complimentary growth based strategy is needed to ward off a European Great Depression, which will only make the debt situation more unsustainable.
I also admit that Berlin and the Troika may have failed to take into account of the sensitivities of the population of other countries and the risk to the European project when they took their decisions. I also firmly believe that, just like in Southern European debtor countries, politicians in Northern European creditor countries, particularly the German leadership, albeit for the opposite reasons, frequently failed President John F Kennedy’s “Profiles in Courage” Test.
Those who are willing to take the test, and pass it, become statesmen, in that, they stood by their personal political beliefs regarding the future of their country, even though their friends, colleagues and constituents overwhelmingly disagreed, posing a clear political cost that has the power to destroy one’s career. The category that chooses to be led by the polls, rather than to challenge and change the polls, are politicians. That said, I will lay out my argument explaining the opinion of the German voter, which, rightly or wrongly, motivates Chancellor Merkel’s coalition.
[A] The first thing that should be made clear, is that, however genuine the grievance, however deep the suffering caused by a failed austerity heavy strategy, the politicians of Southern European creditor countries, the media, and the public at large, should not, in any circumstances invoke the memory of WWI and WWII. They should not refer to Chancellor Merkel as the “Fuhrer of the Fourth Reich”, “Hitler’s demon love child” and they should not declare that Germany is launching WWIII, with the weapons of choice being euros instead of blitzkrieg panzer divisions and V-Rockets. They should not be implying that Germany intends to turn countries like Greece and Cyprus into giant versions of Auschwitz, as SYRIZA’s Tsirpas did when he called the austerity a “Holocaust”.
I certainly do not endorse the claim that “Germany seeks to do to Cyprus what Bashar Al Assad is doing to his own people”. Although passions are running high at the terrible state of affairs, this is wrong on many levels. It is wrong in that it trivializes the bravery and suffering of all those who fought Nazism on the battlefield, including the German military officers, led by Klaus Von Stauffenberg, who tried to kill Hitler in an abortive coup. It is wrong in that it trivializes the suffering of those who endured the destruction of their countries and societies by Nazi occupation, from Norway to Greece to the Ukraine.
It is wrong in that it makes light of the men, women, and children, who, because they were deemed unworthy of life for whatever reason, were shot above ditches, locked in gas chambers and asphyxiated, or pushed into crematoriums while they were still alive. However, besides betraying an immature lack of perspective, it is wrong on both a moral and political level in that German voters see it as a strategy of psychological abuse and emotional blackmail. Nazism was not just a crime against humanity in itself-it was a crime in that it destroyed the soul of a proud nation by degrading it to the spirit of a monster.
Virtually every German family carries a portion of that trauma of guilt and shame. They believe they are trying to atone for it by offering to help their fellow Europeans. Do you think it is nice to have this trauma constantly thrown back in one’s face? Do you think we could persuade the German voter to be reasonable and allow leeway to their leaders? Do you think it is right to label the people who are supposed to save us as “barbaric Krauts” or “Teutonic Brutes”? Do you think this will rebuild a united and dynamic Europe?
[B] My second line of argument concerns the cultural misunderstanding between Southern European debtor nations and Northern European creditor nations, particularly Germany. Southern Europeans, because of Roman Catholic and Orthodox views of community and different political development, have an interpretation of solidarity. This also extends to France’s political economy, regardless of left and right divisions. Unfortunately, this communal idealism has translated into thinking that the Northern Europeans in general, and the Germans in particular, are unfeeling asset strippers and deficit scolds at best, or jack-booted fascists at worst.
This is not the case. Northern Germany was the centre of the Protestant Reformation. Its’ leader, the formerly Catholic monk Martin Luther, gave his name to one of the earliest Protestant denominations-Lutheranism. Lutheranism teaches that the individual is primarily responsible for his own spiritual salvation by the grace of God. This theological standpoint entered the economic sphere as the Protestant Work Ethic, where it is believed that industry and frugality would not only lead to spiritual salvation, but economic independence.
However, Lutheran culture encourages the notion of charity and communal solidarity on these grounds; that the community of individuals should, from time to time, offer help to individuals who are experiencing hardship or have lost their way so that they can become not only independent again, but also, contributing members of society. In an opinion piece in the New York Times, Harvard German History Professor Steven Ozment, set out Martin Luther’s vision of Christian, and civic, responsibility:
“He made the care of the poor an organized, civic obligation by proposing that a common chest be put in every German town; rather than skimp along with the traditional practice of almsgiving to the needy and deserving native poor, Luther proposed that they receive grants, or loans, from the chest. Each recipient would pledge to repay the borrowed amount after a timely recovery and return to self-sufficiency, thereby taking responsibility for both his neighbors and himself. This was love of one’s neighbor through shared civic responsibility, what the Lutherans still call “faith begetting charity.””
Although Germany is a secular country with a significant Roman Catholic minority, this doctrine has formed the German outlook, and is seen as the root of Germany’s industrial and economic might, from the small Mittelstand firms to the engineering giants. It is an especially relevant doctrine for Chancellor Merkel. Her father was a Lutheran pastor from Hamburg who moved his young family from West Germany to East Berlin just so that he could work to keep Christianity alive in the East German communist state.
Beyond the influence of her father’s preaching, Merkel was influenced by the stifling lack of encouragement of individual and civic enterprise and initiative. Combined with the obvious facts that she believes in German economic efficiency and rigor, Germany’s strength as an export model and that she leads a centre-right party, that, although not as much as the British or American conservatives, has a skeptical view of big government, and it is not very surprising at all that the German Chancellor has adopted a tough line to the Euro-Crisis.
[C] That being said, it should be noted that long before the Euro-Crisis burst into view, German voters and taxpayers have been fulfilling a civic responsibility towards the rest of Europe throughout the history of the European project. It started with the Marshall Plan, when the United States offered its Western European allies reconstruction funds after WWII, including the defeated foe, Germany. West Germany’s new democratic leadership, its industrialists, small businesses, workers and society as a whole used this opportunity in true civic Lutheran fashion-they fashioned an economic miracle or Wirtschaftswunder- at the same time as ditching the worthless pre-war currency , the Reichsmark in favor of a stronger Deutschemark.
They were able to do this despite initial Allied restrictions on German manufacturing capability and the requirement for some war reparations. West Germany, along with France, became the motor of the EU’s predecessor, the European Coal and Steel Community. It was returning the interest back in spades by becoming a pillar of the free world. Germany’s civic responsibility towards Europe did not end there. As part of its efforts to atone for the past, and lay the groundwork for a mutually prosperous future of a union of European nation states with strong market economies and healthy welfare states, it was ready to put its financial muscle-essentially the money of German voters and taxpayers, towards achieving that goal.
The EU had a couple of big waves of enlargement. Each time, it was expected of the Federal Republic of Germany, as the biggest economy, to contribute the bulk of aid funds to incoming neighbors so that they could get their economic fundamentals up to scratch. The most recent enlargement wave, 2004-2007, saw Cyprus and Malta enter the EU alongside Poland and other formerly Eastern Bloc countries. The other notable enlargement wave was in the late 70’s and early 80’s when mainly poor countries that had recently right wing military dictators were welcomed, except for Ireland, which, although poor, was always a liberal democracy, and the UK, which although it was facing economic hard times, was still something of an economic great power. The poor, new democracies that were entering were called Spain, Portugal, and…Greece.
One would think that the German voter and taxpayer would expect that the funds, which continued long after these countries joined, [Common Agricultural Policy, regional aid, European Investment Bank] right up to the onset of the crisis, would be as wisely invested as the Germans did with their bit of the Marshall Plan. One would also expect that these countries, after wisely investing the allocated funds, would, aside from thriving, would be active co- architects of a giant, competitive high economic growth, high quality of life area in an age of several global economic great powers. One would also expect that the German voters and taxpayers who provided these funds would be quite angry that their partners had landed themselves in such dire straits that the continent’s very economic existence is threatened, just like an uncle would be angry at his nephew for involving the family business in a Ponzi scheme.
[D] Speaking of Ponzi schemes, the current anti-German feeling gripping Southern Europe, particularly Greece and Cyprus, adds insult to injury, and is a source of angry confusion to the German voters and taxpayers. True, the unwillingness to consider complimentary pan-European fiscal and monetary stimulus policies, as well as a series of half measures on the part of Merkel’s government and the German dominated European Central Bank have massively contributed to the crisis, but they were not the origins. German voters and taxpayers know in their gut that they did not cause the crisis.
Who did, then? The list is long but it is simple. First, we have the US Republican Party, led by the George W Bush Administration from 2001 to 2009, and the Republican Congress from 1995 to 2007. They were the ones that made irresponsible piling up of more and more debt fashionable in the West. They were the ones who passed an unpaid for, three trillion dollar tax cut on top of a disastrous unpaid for and unnecessary war whose liabilities range from three trillion dollars to six trillion. They were the ones who enthusiastically repealed and removed common sense regulations on Wall Street and Main Street alike that even Ronald Reagan, the free market champion, didn’t try to remove during his eight years in power.
It was the ensuing Wall Street culture of greed that led to the investment in, and marketing of complex financial products centered on mortgage securities to the middle class and those whose economic status was weakening as inequality grew. They encouraged the spendthrift, unsustainable feel good culture of false prosperity based on ever accelerating, ever rising home values, whilst allowing exports to decline as a share of GDP. It was these actions that destroyed a 158 year old investment bank.
Also, it was the sheer spitefulness of the radical fringe of the Republican Party, who, because they could never accept a liberal African-American president, let alone the son of a Muslim Kenyan immigrant, did everything possible to throttle the economic recovery during Obama’s first term. The would be grown-ups within the Republican Party refused to stand up to the crazies because they feared a negative reaction from their voter base and donors and they also rationalized that a weak economy would give them back the White House in 2012. Even after they lost, they still are following the same strategy, the sole objective being to beat Hillary in 2016.
Meanwhile, as America begins to inch ever closer to Europe style collapse because of Republican obstinacy, the combined economies of the EU also suffer, as America is their main trading partner. Second, we have the British, where the City of London decided to mimic Wall Street by engaging in mortgage backed securities on top of an unsustainable housing and real estate boom, and where the Labour Party, overcompensating for its past radically socialist agenda, got too cozy with big business, in effect damaging free market capitalism. Ditto the Irish, who discarded the competitive advantages of a vibrant diaspora and a low corporate tax hub for investment from small niche high tech firms and giants, like Google and Apple because they wanted to ape their British neighbor. That is just the first country that required a bailout. Then we have the rest of the West, consisting of not just the Southern European periphery, but even France.
The Italians, although they were told that they had to tackle their too high debt to GDP ratio for over 20 years, and that they had to regain competitiveness and increase economic opportunity for their young underemployed and employed, kept electing a clownish, rakish crook whose main objectives were to protect his business interests, keep himself out of jail, and sleep with every young woman who caught his eye, not necessarily in that order. The Spanish, although they kept their budgets healthy, and made some reforms, didn’t go far enough and allowed their local community co-ops engage in their own property bubble. The Portuguese overspent on infrastructure and civil servants. The Greeks however did the most.
The Greek governments, with Andreas Papandreou setting the example with the Bank of Crete scandal, encouraged the culture of tax evasion and the patronage and cronyism bloated big state, with jobs traded for votes. They encouraged kickbacks with contractors big and small, [this included a few corrupt German businessmen from Siemens even]. They wanted to be at the heart of Europe without having to tell their voters, that, to achieve this goal required root and branch change, so they cooked the books repeatedly to get into the Eurozone. In fact, Germany was doubtful from the very beginning as to whether Greece was suitable to be a founding member, but France nagged her incessantly.
They splurged on the Olympics they couldn’t afford, and allowed the legacy to rot and Greece’s beautiful forests to burn for the sake of corrupt developers. When they admitted they were in trouble, instead of the two mainstream political forces uniting, they became more divided than ever; the New Democracy opposition, led by now Prime Minister Antonis Samaras cynically calculated that scorched earth opposition to the debt consolidation and bailout legislation put forward by George Papandreou would win them populist votes, despite the fact that, as an Ivy League educated economist, he should have known that he was damaging internal and external confidence in Greece. His behavior was especially galling, in that the 2004-2009 New Democracy government had virtually tried to rack up as much corruption as the previous 18 years of PASOK combined.
Furthermore, if he had put pragmatism ahead of personal ambition, and been willing to share the political cost with Papandreou, he could have acted as Greece’s unofficial ambassador to the centre-right, moderate conservative and Christian Democratic parties of Europe within the parliamentary European People’s Party, of which Merkel’s party is the main member. He could have utilized the contacts to persuade Merkel that Greece was a united and credible country and that bailout terms could be eased to kick-start economic growth. But he didn’t. As if that wasn’t bad enough, Greece’s political class failed to keep law and order, allowing both far right and far left agitators riot, further damaging the economic climate and reducing the chances of achieving its economic aims, as if the constant general strikes and protests weren’t bad enough. Although Greeks were right to be aggrieved at suffering, they kept digging the hole they were in by opposing everything through non-stop demonstrations. German voters and taxpayers did not ask for any of this.
[E] Cyprus was seen as the last straw by the German tax paying electorate. Our Soviet educated, Cold War throwback President was warned by the Opposition, the former Central Bank governor, a succession of finance ministers, coalition partners and the markets that the economic crisis was going to hit Cyprus sooner or later and that some of his spending plans had to be postponed or canceled so that we can undertake fiscal consolidation and reform. We were watching Greece destroy itself in front of our own eyes and we did nothing. We continued to fly obliviously like a pigeon colliding into a skyscraper.
Can you blame the German voting taxpayer for being angry at helping us? Can you blame the German households and enterprises for being angry at having to bail out Cypriot banks because our bankers hadn’t paid attention to what was going on in the world and foolishly bought up Greek assets and debt that would soon become worthless? Can you blame the German political leadership for being tough on our country when we could have avoided this mess if it wasn’t for President Christofias arrogantly refusing to meet with the Central Bank Governor he disliked so as to discuss the impending haircut on Greek debt held by Cypriot banks at an EU summit.
Do you think they have spare political capital to spend on a country that is close to Russia, when its very closeness to Russia, in the form of not destroying Russian munitions destined for Syria, blew a crater in our economy? Do you think that German political leaders and some of the more knowledgeable members of the German electorate, had forgotten that the President before Christofias, had essentially put up a neon sign saying “Eastern European underworld welcomed” by laundering the money of Serbia’s late dictator and war criminal, Slobodan Milosevic?
Do you think that the German political leadership did not know that our blundering attorney general had told the Daily Telegraph that he had no intention whatsoever of investigating whether persons connected to the Magnitsky affair, a case of tax revenue embezzlement, illegal private investor property confiscation, and murder by torture, had some of their ill-gotten wealth stored in Cyprus, when other countries were passing laws to deny these persons’ entry? Do you think any German politician, facing an increasingly fed up and Eurosceptic public in an election year, was going to ignore these issues, especially since everybody got the impression that our former President was engaged in stalling tactics, ballooning the funds required in the process, and acting as if he could dictate the terms according to his party’s manifesto?
[F] Lastly, a final justifiable grievance of the German voter should be noted. Germany’s governments, especially the left leaning Social Democrat-Green Coalition of 1998-2005, had implemented a continuous raft of austerity and reform related measures, as its business community engaged in restructuring. Germany was hit with two shocks at once-the rapid emergence of new economic great powers like China, and the reunification of its own country with the collapse of the Iron Curtain.
The West Germans had inherited a mess when they welcomed East Germany back into the fold. Hundreds of billions of dollars were needed to invest in East Germany so that it could converge with West Germany’s economy. Meanwhile, the emergence of low cost destinations in Eastern-Central Europe and around the world meant that German workers couldn’t take good, high skilled manufacturing jobs for granted, or the revenues needed for a strong welfare state. Benefits of various types had to be reformed, unions had to embrace reasonable changes and adapt, VAT and social insurance taxes hiked and businesses had to have a smart strategy to integrate the West German, East German, and East-Central European economies all had once so that they could keep good paying jobs and technological skill in Europe and export to China, India and Brazil.
The ordinary German worker, voter, and taxpayer had to accept a temporary slowdown in the growth of living standards and they didn’t ask anyone for help or special favors. They expected to be rewarded for their efforts, but then the Great Recession happened: They were told everything was currently unstable and any great reaping of the fruits of their labors could rock the boat and that they should be patient. It’s been over 4 years since Lehman Brothers, and really, it has been 5 since the crisis started to come into view with the American slump in 2007. The German voters, workers, and taxpayers are still waiting, but they see the fruits of their labor going to other people who appear ungrateful, spiteful and insulting. Something has got to snap.
In conclusion, while German taxpayers, workers and voters have indeed tried to be good cultural Lutherans, it is hard for them because, it is not only other peoples’ messes they are expected to help clean up. The messes aren’t events that were out of the victims’ control. It was in the hands of the various national political and business elites, and unfortunately, their voters for not realizing problems were ahead. However, that still could be tolerated somewhat. What couldn’t be tolerated is the perceived ungratefulness and sometimes expressions of even envy and hatred from the people that they are trying to help.
They cannot tolerate the lack of appreciation of previous German sacrifices that were often wasted, as is the case with the Greek bureaucrats often stealing the EU structural funds. When they reluctantly agreed to give up their beloved Deutsch Mark as a price for a reunited Germany, they expected other countries to fulfill their side of the bargain. While this does not excuse the German leadership for not even bothering with JFK’s test by asking “My fellow Germans, do not ask what Europe could do for you, but what you can do for an United States of Europe”, they are in an undeniably tight spot. We should help them by handling our differences with dignity, not by trying to degrade them through psychological abuse and emotional blackmail.